Understanding the Attributed Impact Generated Through Philanthropic Donations
Philanthropic foundations donate money to NGOs and programmes to address various societal challenges. One such foundation aims to deliver solutions to pressing social issues in different fields, such as improving education around the globe, providing access to basic healthcare for everyone in need, or ensuring child protection.
Value for the organisation
The foundation wanted to get support with demonstrating the impact it creates through its programmes and, ultimately, the value created for society. In a pilot project, the foundation explored using an Impact Measurement and Valuation (IMV) approach to do so.
The foundation was able to learn more about IMV and how it can successfully be applied to the work that it does. It gained tangible insights into the monetised impact of several of its programmes and the value in euros that it creates through its programmes, together with its donors.
How was impact measurement applied in practice?
First, the scope of the pilot was determined. For the purpose of this pilot, three different portfolios (health, education and child protection) and one impact per portfolio were selected for the analysis. These portfolios were selected as each of them posed different challenges. In total, 25 programmes across the three portfolios were included in the analysis.
Second, the impact pathways were designed, tailored to each one of the different portfolios. Based on them, different metrics to quantify each impact were determined. For the health portfolio, the effect on human health through the DALY loss avoided was calculated. For the education portfolio, the effects of future benefits of education were calculated using the total LAYS (Learning-Adjusted Years of Schooling) gain. Using this innovative metric provided a better insight into the effectiveness of the education received, rather than just looking at traditional metrics such as the number of years of education. Lastly, for the child protection portfolio, the effect of reduced child and forced labour thanks to interventions of the NGOs and programmes in scope was calculated.
To calculate the impact of each programme, a reference scenario was used for comparison. For example, in the case of one of the programmes of the healthcare portfolio, the reference scenario used was the average access to healthcare in the given country.
In the last stage of the analysis, the impacts were monetised to allow for comparison across programmes. For instance, for the education portfolio, the number of years of additional schooling per child and the quality of the education received were used. Considering the total number of students experimenting additional years of schooling gives the total LAYS. Lastly, the result obtained was multiplied by the expected future earnings per LAYS (EUR/LAYS), resulting in the effect on future benefits of education, which was expressed in Euros. Finally, the impacts were allocated to the philanthropic organisation. Because there projects receive funding from a variety of funders, the impact was allocated to this philanthropist based on their share of financing.
This projects results in an impact per Euro invested metric that can be useful for comparison among different initiatives.
For a detailed description of the steps followed, refer to the Impact Measurement in the Financial Sector document.